Riad Salameh

BEIRUT — Lebanon’s central bank governor said on Tuesday Lebanese banks must comply with a new U.S. law targeting Hezbollah’s finances and that failure to do so risked international isolation of the country’s banking sector.

Iran-backed Hezbollah, which is classified as a terrorist group by the United States, wields enormous political influence in Lebanon and its powerful military wing is playing a major role in the Syrian conflict.

The U.S. Hezbollah International Financing Prevention Act (HIFPA) passed in December threatens sanctions against anyone who finances Hezbollah in a significant way.

The law has ignited an unprecedented dispute between Hezbollah and a central bank widely seen as a pillar of stability in an otherwise weak and dysfunctional Lebanese state.

Governor Riad Salameh said banks must comply with the law but that decisions to close accounts would be overseen by the central bank to ensure that the closures were justified.

“It is not possible to guarantee credit stability if (the central bank) does not implement the U.S. law,” he said in a statement. “If we do not do that … our banking sector could become isolated from the world.”

The United States has a list of people sanctioned for terrorism. A Lebanese bank or company doing business with anybody on the list will not be able to deal with any U.S. financial institution because that institution could be fined for non-compliance.

Hezbollah enjoys strong support in the Lebanon. Its members include government ministers, lawmakers and local councillors.

Lebanon’s banking sector accounts for around 6 percent of gross domestic product.

Since 2001, the United States has put more than 100 individuals and entities affiliated with Hezbollah onto sanctions lists under existing anti-terrorism funding legislation, but the new law is aimed at Hezbollah specifically.